Recursos Naturales inagotables

Terms of Reference

Consultant: Sheila Page, Overseas Development Institute (ODI), 111 Westminster Bridge Road, London SE1 7JD

Tel: +44 20 7922 0300; fax: +44 20 7922 0399

Contract dates: Retain contract from 15 September 2002 to 22 January 2003.

Coordination: Raul Hopkins, Regional Economist, Latin America and the Caribbean Division, IFAD

Background

1. The process of globalisation has created both challenges and opportunities for small rural producers in developing countries. However, our understanding of the links between trade, trade policies and rural poverty is still limited. The opening of markets and the fall in transaction costs alone do not automatically lead to a reduction in rural poverty. Despite the lowering of trade barriers, many small producers still find it difficult to access international markets, notwithstanding the comparative advantage they may have in the production of certain types of commodities. A co-ordinated effort is required at the economic policy- making and institutional levels to allow small producers to benefit from trade globalisation. 2. Recent literature has given particular emphasis to the analysis of the consequences of trade on development (e.g. (i) the relationship between trade and growth; (ii) trade and income distribution; and how (i) and (ii) relate to poverty). Less attention has been given to processes and policies at the micro and macro level that could enhance the successful participation of poor producers in markets (local, regional and particularly international). There is a need to integrate the knowledge derived from the field of marketing with the knowledge accumulated by international economics (and trade in particular).

3. A starting point for this assignment would be the analysis of initiatives that support producers in their attempt to expand their access to international markets. This would draw on the experience of the private sector, alternative trade organisations and the discussions on market access that are taking place in the regional meetings of the International Federation for Alternative Trade (IFAT)18, and other fair trade networks. The assignment would give special attention to the experience of IFAD in promoting trade (e.g.: the activities of PROMER and RUTA), as well as the innovative efforts that are currently being undertaken (or have been taken in the past) by other organisations in developing countries to expand their market access.

Purpose

4. The purpose of this assignment would be to explore the main options and opportunities open to IFAD and other international development organisations that could make the process of globalisation work for the rural poor. Emphasis would be given to the theme of market access, which is of great concern for producers in developing countries.

5. A hypothesis that motivates the assignment is that there are a number of complementarities and externalities between the participants in various activities related to international trade that are not fully exploited. It would examine the possibility of taking advantage of them.

6. The specific aims of the assignment would be to:

a. Define the main obstacles producers face in accessing international markets, as stated in: (i) the recent literature; (ii) meetings of producers’ associations; (iii) trade negotiations of developing countries; and (iv) recent events on the subject. Emphasis would be given to agriculture-related commodities and handicrafts. An attempt would be made to prioritise these obstacles.

b. Discuss how best to overcome these obstacles. Define, in this context, the main opportunities open to small producers with the process of globalisation and what they imply in relation to economic policy-making and institutional development at the macro and micro level.

c. Outline a set of options to increase the market access of developing countries. An effort would be made to categorise and rank these options, taking into account what is being done by some of the leading institutions in this area.

d. Consider the possibility of a global partnership on the subject, making use of the existing comparative advantages and complementarities among a set of international development organisations. Initially this could involve:

? The International Federation for Alternative Trade (IFAT);

? The International Fund for Agricultural Development (IFAD), and

? The Overseas Development Institute (ODI).

This list could be expanded in a second stage to include other organisations and institutions from developing countries. The possibility of a pilot project involving a set of innovative experiences would also be considered.

7. The emphasis of the assignment would be on the development of new ideas that could then shape a proposal to be presented jointly to a number of donors. We would also expect to be innovative in terms of methodology, involving a process of formal and informal consultations with key stakeholders and a creative use of information technologies.

8. The Consultant will perform any other task related to this assignment that the Director of the Division and/or the Regional Economist may deem necessary.

Methodology

9. The methodology would consist of a combination of instruments, including informal interviews, group discussions, and review of secondary sources. The possibility of one or two informal workshops on the subject would be explored (one could deal with the micro economic aspects of trade; and the second on key aspects at the macro level such as: sanitary and phytosanitary regulations, subsidies and countervailing measures; and issues in agricultural trade negotiations at the WTO).

10. The possibility of using the livelihood analysis and trade and poverty frameworks will be considered, as well as an early involvement of organisations in developing countries. A more detailed discussion of the methodology would take place on 23 August 2002 in London.

Notes

1 This report was discussed at two workshops (November 2002, February 2003). I am very grateful for the comments of all the participants. I would also like to thank Raul Hopkins for his advice and suggestions throughout the project. None of these is responsible for the views expressed here.

2 IFAD (2003) Promoting Market Access for the Rural Poor notes that ‘Markets are of fundamental importance in the livelihood strategy of most rural households’.

3 The question of how trade affects development or poverty has been extensively analysed. For a survey see Page, 2001

4 This need emerged in Eastern Europe as well: there were products, but not the marketing ability at firm level, and the shift in markets towards the rest of the world meant an even heavier demand on marketing because of the need to seek and adapt to new markets.

5 In Kenya, the expansion in horticultural exports to the UK in the 1980s came from small firms, so that there was a shift from a preponderance of medium and large scale firms to small holders (Dolan, Humphrey 2001, p. 9).

6 Discussion identified an example where liberalisation of food trade led to imports of Costa Rican oranges displacing Nicaraguan production, but the workers in Costa Rica were Nicaraguan migrants. 7 We exclude some found in the Appendix because they are specific to particular activities or because they assume tensions between trade and social development.

8 Bonaglia, Fukasaku 2002, p.63, cite the example of inputs of high quality leather in Ethiopia: unlike cattle and leather products, processing leather is a high technology industry.

9 Dearden et al. 2002 paragraphs 26, 30, on the difficulties of introducing new horticultural products in Ethiopia.

10 Most Favoured Nation: the formula used by the WTO for standard tariffs applied among its members, originally to distinguish them from those on non-members.

11 Ronchi (2002) fails to recognise this conflict, stating both that ‘the basic premise of Fairtrade’ is ‘use of the market to provide assistance and support to producers in the South’ and that there are ‘two distinct groups of stakeholders: consumers and producers’, and that it is therefore necessary to look also at the impact on consumers including ‘awareness raising’ (p. 9).

12 The studies suggested that support for production, ‘supply side measures’, was better than support for marketing. The argument in this paper is that the stages of market access are complementary, not competing.

13 Wadsworth (2002) notes that Guatemala established an export promotion agency in 1978, which failed in 1980, but then non-traditional exporters set up their own group. This has survived and is successful. In Ghana, ex-employees of the exports agency moved into exporting companies.

14 The 1950s development debate about whether a Big Bang is necessary because of economic interdependence among sectors or whether uneven development was possible, using imports to replace missing sectors, can be applied to analysis of the network of public and private services needed to trade.

15 They are now sometimes seen as replacements for poorly performing export agencies (e.g. WTO OECD 1997 p. 8), but the timing of their establishment and the fact that the arguments against export agencies were used as a reason for disbanding the UK agency (DECTA) in 1994 suggest that this is not correct. In the 1990s the idea of providing free support for firms was being questioned. WTO OECD 1997 p. 11 suggests that it has ‘risks of distortions of competition and rent-seeking’, so that there should be cost sharing by firms and more stress on support for trade related services, rather than directly to firms. It seems more probable that the import promotion agencies which survive carried on in spite of the rejection of export promotion (because most were slightly removed from normal aid debate and managerially apart from aid agencies).

16 ‘The efforts to trigger the emergence of a new “private sector” presence in cocoa marketing [in Ghana following the Structural Adjustment Programme of 1993] did not see farmers as potential “entrepreneurial” planers in the chain.’ (Pauline Tiffen on www.divinechocolate.com)

17 ‘The fact that farmers do not always adopt seemingly attractive agricultural technologies can in many cases be attributed to there being no financial incentive or support structure for them to do so. Neither ICRISAT [International Crop Research Institute of the Semi-Arid Tropics] nor its NARES [national agricultural research and extension systems] partners have comparative advantage in markets or business development, but they can catalyse the development of partnerships to create the n ecessary incentives, thereby stimulating demand for new technologies.’ Jones et al. 2002 p. 6.